The move has angered ALP members in Victoria, who fear the deal might also affect how people vote in the lower house seat of Melbourne, which Labor is trying to win back from the Greens.

ALP national secretary George Wright did not respond to calls from Fairfax Media.

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A senior Greens operative said the balance-of-power party would be preferencing Labor in the Senate in a similar fashion.

''You can forget all the rhetoric. At the end of the day, Labor and the Greens need to preference each other that way to keep the others out,'' the contact said.

''It's just a pity it didn't occur in Queensland too.''

A Katter's Australian Party source confirmed the fledgling party — whose chances were best in Queensland — would preference the Coalition above Labor in most state Senate races.

But in Queensland, KAP and Labor have reached a deal to preference each other above the Liberal National Party in the Senate.

Labor and KAP are also expected to swap preferences in regional Queensland marginal seats including Herbert (held by LNP with a 2.2 per cent margin), Hinkler (LNP by 10.4 per cent), Flynn (LNP by 3.6 per cent) and Capricornia (Labor by 3.7 per cent).

In many regions the KAP vote was higher than that of the Greens in the Queensland state election last year.

KAP remains in talks with the parties about preferences in other lower house seats including in western Sydney.

The KAP source said in some lower house seats the Greens would recommend preferences for the KAP above the ALP.

Prime Minister Kevin Rudd refused to confirm any preference deal with Mr Katter on Friday, saying only that such arrangements were a matter for the organisational wing of the parties.

Opposition Leader Tony Abbott announced earlier in the week he would order his party to preference Labor above the Greens and called on Mr Rudd to take a similar hardline stance against the Greens.

Palmer United Party and KAP announced on Friday they would place each other above the major parties on how-to-vote cards for all House of Representatives seats.

Parties and senate candidates have to lodge their upper-house preference tickets with the Australian Electoral Commission on Saturday.